Company A’s EPS is $1.50. Its closest competitor, Company B, is trading at a P/E of 22. Assume the companies have a similar operating and financial profile. 1). If Company A’s stock is trading at...

Company A’s EPS is $1.50. Its closest competitor, Company B, is trading at a P/E of 22. Assume the companies have a similar operating and financial profile.

1). If Company A’s stock is trading at $37.50, what does that indicate about its value relative to Company B?

2). If we assume that Company A’s stock should trade at about the same P/E as Company B’s stock, what will we estimate as an appropriate price for Company A’s stock?